The typical expatriate in Hong Kong today is single, here for the short-term and has a housing allowance. And, after spending a long day in the office, they do not spend much time in their flats - unlike the expat of yesteryear who came with a family, pets and responsibilities to attend to after work.
So now the priority is to be near Hong Kong's lively nightlife in SoHo, Wan Chai and Causeway Bay.
Therefore newcomers will pay big money for the luxury of living in the 'right' location and well-positioned serviced apartments can be small but will yield top dollar.
According to some boutique serviced apartment owners, some clients are so busy that when their housing allowance runs out they take up permanent residence in the serviced apartment because it is so convenient and it is too much trouble to move.
The formula works so well that demand seems insatiable. Two boutique serviced apartments, V serviced apartments and Kush, report 90 and 100 per cent occupancy, respectively, at their properties, with their new launches quickly gaining pace.
A broad range of sizes and prices exist at the boutique level. Units at V and Kush range from 285 sqft to 2,000 sqft, some with terraces or private gardens and cost between HK$19,500 and HK$60,000 per month.
Alex Bent, a founding partner of Kush serviced apartments, which recently launched the flagship Kush 222 and now has three properties with a total of 82 units, said Hong Kong was a good market for boutique serviced apartments because of hiring trends.
'Corporates only sent the highest level staff with three kids and two dogs to The Peak before 1997 ... that model has changed a lot purely because of cost. Banks are hiring a lot younger than they used to,' he said, noting that companies usually granted young professionals moving to a permanent role one to three months of serviced apartment housing allowance in which time they must find their own flat.
For those in town on a project basis the average stay is three to six months, although contracts can range up to two years at some boutique outlets. The location of a serviced apartment is critical and people looking to develop serviced apartment properties see strong potential.
And, because at the boutique level properties are generally renovated residential or commercial buildings, the time from idea to launch may be less than a year. Business fundamentals include location, quality, service and consistency.
V serviced apartments, has been in business since 1994 and has three properties with a total of 206 units.
Director Anna Mae Koo said: 'Trends change but what people look for in ... accommodation doesn't. When we come down to the bare bones, the service standard and quality of things you provide, as well as location, these things don't change. The perks, the 'hipness' - those will change.'
Being small can be an advantage.
'We are of a size able to constantly change to meet clients' needs but are still large enough to provide economies of scale to give tenants value for money,' Ms Koo said.
Finishing touches can make all the difference to a serviced apartment complex and being trendy will appeal to younger clients.
Boutique serviced apartments integrate design elements of mood lighting, eco-friendliness, special conveniences such as wardrobes that can be accessed through the bedroom or bathroom, furnishings on par with a five-star hotel, dining discount cards and complimentary gym memberships. Even if guests do not spend much time in the rooms or the gym, it is important to have all the amenities.
However, rather than gambling on a full house, proprietors are keeping their ear to the ground to attract guests. Owners speak regularly with human resources professionals at banks, law firms and corporate relocation agencies. They are reporting pre-bookings at least through the summer and assurances through to the end of the year.
Mr Bent said: 'The market this year appears to be quite stable. We are quite confident for 2008.'
Ms Koo, while cautious, said that there was demand to support industry growth. 'I think the property market in general is quite volatile at the moment, but that is expected given the subprime market [crisis in the United States]. I think, however, that the serviced apartments sector has room for growth. I expect it will be volatile but not a sector that will suffer too much.'
Dinesh Nihalchand, also a founding partner at Kush, said his business should be good this year. He said high salaries, low unemployment, increasing corporate expansion, accelerating rents and negative real interest rates would help.
'Whatever we bought in 2006 is protected by positive macro and micro market fundamentals in Hong Kong,' Mr Nihalchand said.
He was positive on the future of the serviced apartment industry in Hong Kong. 'We see promising indicators that multinational corporations are entering the market and using Hong Kong [as a base] for regional operations,' he said.
V serviced apartments, banking on a robust economy in Hong Kong, has two additional properties in the pipeline. Next year the company will add properties to its portfolio in Causeway Bay (20 units) and West Kowloon (96 units).
Both will follow the brand's mantra by fulfilling demand for more deluxe and larger serviced apartments, while maintaining boutique personal touches. The new units will be from 500 sqft to 1,000 sqft and some in West Kowloon will incorporate home offices.
Ms Koo said: 'We hope to grow to about 1,000 units in the next five years. It's fast, but we've been in this sector a long time.'
Kush continues to look at opportunities on Hong Kong Island, 'particularly in west Mid-Levels and the Western District of Hong Kong [Island]', Mr Nihalchand said. He hoped to capitalise on the MTR expansion there. He also expressed interest in the emerging markets of southern India and China.Topics: Hong Kong Political Geography Causeway Bay Hong Kong Serviced Apartment Business